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Fed Warns of Risk to Economy

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Fed has been warning of the potential risk to the United States’ economy. As a result, it has established measures to combat economic slowdown. Some of the steps taken by federal to facilitate economic growth include: increasing the rate of employment by improving the labor markets as well as dealing with other summer economic threats. On the other hand, financial markets in the foreign markets pose a major challenge. They have in one way or another contributed to the economic decline.

Federal has the mandate to ensure that United States’ economy is revitalized. This is by strengthening domestic markets that have been weakening over the years. Moreover, the increased financial constraint in Europe is likely to affect economic performance of domestic markets. Some economists have expressed their skepticism on the Fed’s measures to improve the economy. Notably, the monetary action in United States has been limited. This has been caused by several factors such as lack of confidence, uncertainties as well as credit constraints.

Federal is prepared to take several steps such as engaging in bond-buying to improve the economy. When Fed buys such bonds in the long term, it pumps more money into the financial economy. This way, Fed is expecting to lower the interest rates to almost zero from 2014. Indeed, keeping the rates low will favor more borrowing hence increased investments until 2015. According to Bernanke, the Bank of England is also expected to increase its credit lending to private sector. This is through offering cheap loans which is eventually passed to households as well as to businesses. As a result, Fed is expecting an economic growth of between 1.9 % and 2.4 %.

Fed has been forced to take more aggressive measures to boost the economy. Since 2008, Federal Reserve has been having problems in stimulating the economy despite its effort to increase rates holdings. As a result, every time bonds are increased, rates move in the opposite direction slugging the economic growth. Virtually, Federal should facilitate provision of lower interest rates and increase in stock prices. These factors will eventually increase the rate of spending and investments by businesses and individuals sparking economic growth.

In conclusion, Federal’s actions to stimulate economic growth have been highly criticized as they do not seem to bear the expected results. However, its success will only be achieved if all stakeholders in the economic sector turn the pointing finger and come together to boost the economic.

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